What is benchmarking? Benchmarking is a process for improving some activity within an organization. We will illustrate benchmarking with the following example. Company Q has identified one of its activities that needs...
What is benchmarking? Benchmarking is a process for improving some activity within an organization. We will illustrate benchmarking with the following example. Company Q has identified one of its activities that needs...
What is the definition of net sales? Definition of Net Sales Net sales is a company’s gross sales of products minus any sales discounts and sales returns and allowances. When a company makes a sale, the general ledger...
What is window dressing? Definition of Window Dressing Window dressing refers to actions taken or not taken prior to issuing financial statements in order to improve the appearance of the financial statements. Example...
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
Which items on a bank reconciliation will require a journal entry? Journal Entries for Bank Reconciliation The items on the bank reconciliation that require a journal entry are the items noted as adjustments to books....
Are sales discounts reported as an expense? Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are...
What does a bookkeeper do? Definition of Bookkeeper A bookkeeper’s role at a company varies by the size and nature of the business. At a very small company without an accountant, the bookkeeper’s duties are likely to...
What is synergy? In business the term synergy is often associated with the merger or acquisition of companies. Synergy implies that the outcomes resulting from the merger of two companies will be greater than the sum...
What are quick assets? Definition of Quick Assets Quick assets are a company’s current assets which can quickly be converted into cash. Quick assets provide the liquidity necessary to pay the company’s obligations...
Where does accrued interest on notes receivable get reported on the balance sheet? Definition of Accrued Interest on Notes Receivable Accrued interest on notes receivable is the amount of interest the lender has earned,...
What is interest payable? Definition of Interest Payable Interest payable is the interest expense that has been incurred (has already occurred) but has not been paid as of the date of the balance sheet. [Interest payable...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
What is a cost variance? Definition of Cost Variance Generally a cost variance is the difference between the actual amount of a cost and its budgeted or planned amount. For example, if a company had actual repairs...
What are some tips to make learning debits and credits easy? Here are five tips to make learning debits and credits easier: The accounts for expenses are nearly always debited. For example, when a company pays its...
What is the difference between liquidity and liquidation? Definition of Liquidity Liquidity usually refers to a company’s ability to pay its bills when they become due. Liquidity is often evaluated by comparing a...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Accounting Equation Basic Accounting Equation In accounting (and bookkeeping) the basic accounting equation is: Thanks to double-entry accounting (or double-entry bookkeeping) the basic accounting equation will/ must...
Financial Statements(Quick Test #2) Download PDF After you have answered all 45 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
What is responsibility accounting? Definition of Responsibility Accounting Responsibility accounting involves the internal accounting and budgeting for each responsibility center within a company. The objective of...
What is the accounting entry when an order is received? There is no accounting entry recorded in a company’s general ledger accounts when an order is received. The reason is that a sale or sales revenues has not yet...
Accounts Payable Accounts Payable Accounts payable are sometimes referred to as trade payables. Accounts payable involve the amounts that a company owes to vendors and others who have supplied goods or services on...
Usually the pay for the hours worked in excess of 40 hours per week. Federal laws require payment for these hours for employees who are not able to control their hours. For example, a company is required to pay a...
In accounting this word is often included in the title of liability accounts. It means the amount owed by a company as of the balance sheet date, even if the company did not yet receive an invoice from the supplier. For...
A company’s net income from the start of the current accounting year until a specified date. For example, the year-to-date net income at May 31, 2024 for a calendar year company is the net income from January 1,...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Does the accrual method apply to the purchase of equipment? The accrual method does apply to the purchase of equipment (as well as applying to revenues and expenses). To illustrate, let’s assume that on December 29 a...
A company’s receipts that appear on the company’s records but do not yet appear on the bank statement. For example, a retail store’s receipts of March 31 are deposited after banking hours on March 31 or...
Some examples of intangible assets include copyrights, patents, goodwill, trade names, trademarks, mail lists, etc. These assets will be reported at cost (or lower) on the balance sheet after property, plant and...
Which date is used to record a credit card transaction? When a business uses its credit card, the transaction date is the date the credit card is used, not the date that the credit card statement is paid. For example, if...
What does the term organic growth mean? Organic growth often refers to the growth in a company’s sales that did not occur because of an acquisition of another company. Expressed another way, organic growth is...
Why do people start their businesses as sole proprietorships? I believe that people start their businesses as a sole proprietorship because a sole proprietorship can be formed easily, quickly, and with little cost....
Working Capital and Liquidity(Quick Test #2 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an...
Bookkeeping Bookkeeping in the Past Historically, bookkeepers were responsible for the following steps in the accounting cycle: Record all the company’s transactions in journals Post the amounts from the journals to...
What is the conservatism principle? Definition of Conservatism Principle In accounting, the conservatism principle (or accounting constraint) directs an accountant, who is faced with doubt between two possible...
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
Bookkeeping(Quick Test #1) Download PDF After you have answered all 50 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
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